One of the common risk response actions in the engineering and construction industry is to transfer the risks for delivering part of the project’s scope of work to consultants, contractors and suppliers usually known as vendors. Nevertheless, a Project Owner can end increasing the project’s risk exposure rather decreasing it if the vendors who are awarded part of the project’s scope of work are not capable of taking ownership of the transferred risks. It is for this reason many Project Owners usually have a formal process for qualifying vendors who might be considered when there is a need to outsource part of the project’s scope of work.
PMWeb Project Management Information System (PMIS) provides out-of-the-box solution to enable this process. It allows the Project Owner to design the prequalification forms and process the way it is best suited for their business. The PMWeb prequalification module will be used to detail the data needs to be provided by the vendor submitting the prequalification such as vendor legal name, registered address, local government registration details, insurance details, past experience details, financial capacity, safety track record among others. In addition, the application will call to include supportive documents which include copies of local registration, insurances, ISO certificates, reference letters, vendor profile among others. In case there are forms needed by government entities such as Safety and other type of compliance requirements, hyperlinks to those external sites will be provided from within the form. Each link will have its own section in the prequalification application. The PMWeb prequalification module allows using Help text to give vendors online instructions to fill out the different fields and forms.
This will enable those vendors who need to participate in the Project Owner bids to provide all those details and supportive documents online regardless where they are located. Using PMWeb, the vendor will login to the webserver, which is available as private or public cloud, and provides all those details and documents in the pre-set format.
The submitted data and documents will become readily available to the Project Owner team where a workflow can be created to formalize reviewing and approving the prequalification submission. In addition, the Project Owner team need to have a formal scoring system to objectively assess the vendor’s capabilities and abilities to perform.
The prequalification scoring is usually based on the weighted average of the different items that a vendor qualification depends on. For example, the Project Owner might consider the following four categories: Financial Stability, Experience, Safety Track Record and Compliance with Specific Government Requirements. For the Financial Stability, the score could be based on Banking Arrangement, Bonding Capacity, Financial Statement, Work in Hand, Working Capital among others. For the Experience, the score could be based on Projects Completed, Value of Completed Projects, Reference Letters Provided, Claims Submitted, Terminated Projects among others. For the Compliance category, this could include registration with local authorities, policy on hiring local resources, adoption of sustainability practices and others.
For the Prequalification process to be objective and comprehensive, it is highly recommended that for each prequalification category item similar to those listed above, the vendor details each item into specific questions where the prequalification team can answer based on what was submitted. A category item should be detailed to as many questions as needed to avoid any ambiguities and to ensure having an objective and fair qualification process. The response for those questions could be text, yes/no answer, financial value, a number that could be integer or decimal, date, if the attached document is acceptable, value from a pre-defined list among others.
The Project Owner can consider a standard 5-point scoring system where 5 stands for full compliance and 1 stands for non-compliance or can set different score range for each question. For example, some questions could have 3 points range while others could have 5 points range used for grading. This indicates how important this question to the overall qualification score. In addition, each one of those questions would have a weight to reflect its importance in assessing the vendor capabilities and abilities. The weighted score will be calculated by multiplying the score points by the item weight value. The qualification matrix will total the score points the vendor being assessed has scored, what were the total score points available and the weighted score value.
The PMWeb prequalification module also has a rating tab to provide a mechanism for the Project Owner’s team members to gather feedback on their experience with the particular consultant, contractor or supplier being considered. The rating is based on a 5-star scale where 5 Stars in the best experience while 1 Star is the worst. Although this rating tends to be subjective nevertheless, it is important to document it.
The Project Owner can design and produce a variety of forms, reports and dashboards to capture the details of the prequalification process. For example, a form can be produced for each vendor detailing the “Outstanding Information Report” where it will list all missing data and data as well as documents that need to be updated. Another important form is the “Prequalification Scorecard” which details the attained scoring for each vendor. Of course, log of all submitted prequalification by the vendors can be produced in any layout and format.
The vendor qualification details can be linked to the PMWeb company directory where all particulars of the prequalified vendor will be stored. In addition, the company module allows capturing the details of the vendor staff that could have been or could be involved in the Project Owner future projects. Similar to PMWeb other modules, documents such as vendor brochures, ISO certification, financial statements, CVs of staff, details of past experience among others.
It is a highly recommended that for vendors who already have active projects with the project owner, whether they have submitted their prequalification documents or not, to have the Project Owner team members to conduct a periodical appraisal of their performance. This appraisal can be conducted quarterly, semi-annually or annually to assess the vendor performance. This data will provide great knowledge for the Project Owner to have a better evaluation of companies they want do business with based on actual working experience. PMWeb custom form builder will be used to create such templates to capture, assess and approve the vendor appraisal.
The information reported on those companies does not need to be limited to the periodical appraisal data but it could also include information about the safety, quality, cost, schedule and other related project performance by capturing the relevant data from the other PMWeb modules. PMWeb provides out-of-the-box as well as custom forms to capture and summarize this data from all the contracts across all projects that this consultant or contractor is performing or even have performed in the past.
So in summary, Project Owners who want to successfully transfer some of their projects’ risk to consultants, contractors or suppliers, better to do the right prequalification process to avoid the risk of having the wrong companies on their projects. They should avoid increasing the risk exposure on their projects as the objective of risk transfer is to reduce it not to increase it.